What counts as billable (and what doesn't)
Billable = hours on client work the client is paying for, directly or via retainer. Everything else is overhead, even if it feels productive.
- • Billable: project delivery, client meetings, scoped strategy, account work inside a retainer.
- • Not billable: sales calls, proposals, pitches, internal projects, training, admin, PTO.
- • Grey area: case studies, content marketing — count as marketing overhead, not billable.
- • Track at the week level; monthly tracking hides utilization drift.
Utilization targets by role
Junior delivery should run hottest, senior strategists cooler. Forcing a 40% senior to 80% utilization is how you lose your best people.
- • Junior delivery: 75–85%
- • Mid-level IC: 70–80%
- • Senior strategist / lead: 50–65%
- • Leadership / founders: 30–50%
Why break-even utilization is the real number
Break-even utilization tells you the floor below which the agency loses money. Knowing that floor lets you make confident decisions about hiring, pricing, and which clients to drop without spreadsheet anxiety.
FAQ
What's a healthy agency billable utilization rate?
65–75% across the team for a small-to-mid agency. Below 55% sustained is unprofitable; above 85% sustained burns out the team and erodes quality.
Should I include PTO in the utilization denominator?
We don't — working weeks per year already nets out PTO and holidays. The denominator is actual working hours available, not 52 × 40.
How do I improve utilization without burning out the team?
First fix the sales pipeline (idle bench is usually a pipeline problem). Second, retire low-margin retainers. Third, productize repeated work so delivery hours fall while revenue stays flat — utilization goes up without anyone working more.